Dollar takes its toll on gold, platinum

GOLD and platinum stocks fell deeper into correction territory this week as commodity prices buckled under the weight of a strong dollar.

The commodity market in particular took strain after betterthan-expected US inflation data on Friday bolstered the case for a possible rise in interest rates in the US in December. The consumer price index grew at an annual rate of 1.1% in August, from 0.8% in July.

Global markets have moved back and forth for some time as uncertainty lingered over when the US Federal Reserve would hike rates, which tend to boost returns that are denominated in dollars. But a stronger green- back tends to hurt commodity prices, which are priced in the US currency.

The gold miners’ index tumbled 10% on the JSE this week, leaving AngloGold Ashanti 29% below its peak early in August, as the gold price came off the boil. But AngloGold remains the second-best-performing stock on the Top 40 index, behind Anglo American, so far this year.

The broader All Share index, which has been trading in a fairly narrow band this year, slid 2.84% to 51 832.60 on the week.

Sanlam Private Wealth head of online trading Gerhard Lampen said the local share market was unlikely to break out of its recent trading pattern until it had clarity on the country’s credit rating, which will be reviewed in December. “The other factor driving global markets is interest rates in the US. Again, there is no consensus on when the next rate increase will come,” Lampen said.

In the currency markets, the rand traded in a wide range against the dollar for the better part of the week, from highs of R14.22/$ to lows of R15.59/$.

The currency’s volatility will likely put pressure on the Reserve Bank’s monetary policy committee, which begins a three-day meeting on Tuesday to decide on interest rates.

Economists expect the bank to keep rates on hold after hiking them by a cumulative 75 basis points earlier this year. The week will also see the release of local inflation data.